Kevin Hanly represents homeowners and other borrowers in foreclosure and certain loan re-negotiations in northern and central New Jersey counties, including Hudson County, Essex County, Bergen County, Passaic County, Union County, Morris County, Sussex County, Middlesex County, Monmouth County and Ocean County.

The NJ Court Rules require that before an attorney submits a document to the court in any lawsuit, he or she must do a reasonable inquiry to ascertain that the factual allegations contained in the document have evidentiary support. In other words, you have to do your due diligence. The rules dealing with foreclosure complaints go a little further. The require the attorney to communicate with an employee of the lender or servicer who confirms that accuracy of the contents of the complaint, and, on top of that, the attorney must check the file to confirm that the employee is telling the truth. Sounds great on paper, but in practice in NJ, you have to wonder how seriously this obligation is taken.

The Consumer Financial Protection Bureau (CFPB) is an independent agency of the United States government responsible for consumer protection in the financial sector. Its jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, other financial companies operating in the United States. It appears that the CFPB takes the due diligence requirements seriously.

In its April 25, 2016 press release, the CFPB stated that it entered into a consent order with NJ debt collection law firm Pressler & Pressler, LLP, two of its principal partners, and New Century Financial Services, Inc., a NJ based debt buyer, to stop churning out unfair and deceptive debt collection lawsuits based on flimsy or nonexistent evidence. The consent orders bar the companies and individuals from illegal practices that can deceive or intimidate consumers, such as filing lawsuits without determining if debts in question are valid. The orders also require the firm and the named partners to pay $1 million, and New Century to pay $1.5 million to the Bureau’s Civil Penalty Fund.

More specifically, the CFPB alleged that Pressler & Pressler used an automated claim-preparation system and non-attorney support staff to determine which consumers to sue. Attorneys generally spent less than a few minutes, sometimes less than 30 seconds, reviewing each case before initiating a lawsuit. This process allowed the firm to generate and file hundreds of thousands of lawsuits against consumers in New Jersey, New York, and Pennsylvania between 2009 and 2014. The CFPB contend that the respondents violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair and deceptive acts or practices in the consumer financial marketplace.

On the other side of the issue, insideARM.com defended vigorously the actions of the law firm and lender, and pointed out that the settlement ultimately involves no consumer redress, no invalidation of judgments and no findings of the use of improper affidavit practices. That article, however, forgot to mention the $2.5 million in penalty payments to the CFPB’s Civil Penalty Fund made by Pressler and Pressler and New Century. Oversight? Or just a puff piece for the so-called “industry”

Will the courts follow the ruling of the CFPB and allow meaningful discovery on due diligence, or just accept without scrutiny the word of lender’s counsel that they did everything according to Hoyle. We shall see.